- CoStar Group of Bethesda, MD Buys 170,000-SF, 10-Story Structure for $41.25M or $243 Per SF
- Mortgage Bankers Association Paid $79 million or $464.70 Per SF for 1331 L Street in 2007
- The 50%-Leased Building is 5 Blocks from White House
- MBA Will Stay in 3-Year-Old Building Until June; CoStar Will Occupy 80% of Premises
- District of Columbia OKs $6.1M in Property Tax Abatements Over 10 Years for CoStar
- CoStar Agrees to Hire 100 DC Residents to its 900-Person Staff
- After Sale, MBA Will Owe About $30M on $75M Loan From PNC Financial Services Group
Andrew C. Florance
The building is 50% vacant. Deal terms were not disclosed but DC area brokers in a position to know tell Real Estate Channel the transaction was an all-cash arrangement.
(Please see related Real Estate Channel posting: Alex's View of the World, Nov. 20, 2009)
For the MBA, the deal represents a $38 million loss in value. MBA paid the developer, DRI Development Services LLC, $79 million or $464.70 per square foot for the building at 1331 L Street in 2007 when it was still under construction.
For CoStar, the deal represents the office building bargain purchase of the year. CoStar paid $243 per square foot for the structure. The current median office market price in DC is $518 per square foot.
By buying instead of leasing, CoStar officials estimate they will be saving about $1 million a year.
To sweeten the deal and encourage CoStar to relocate its headquarters staff of 900 workers, the District of Columbia council is giving the company $6.1 million in property tax abatements over a 10-year period, according to The Wall Street Journal and the Washington Post.
To get that tax break, all CoStar has to do is add 100 District residents to its staff.
CoStar could also qualify for additional incentives such as five-year elimination of District corporate income tax.
CoStar Group CEO Andrew C. Florance sees the transaction as a deal his company couldn't refuse.
"We are fortunate to be able to take advantage of what we see as a historic opportunity to secure an exceptional asset at a greatly reduced price," Florance told the Washington Post.
The MBA plans to use the $41.5 million sale proceeds to pay down its $75 million acquisition loan from PNC Financial Services Group Inc.
The trade association will remain at 1331 L Street until June when it will lease space elsewhere in the metropolitan area. The MBA previously had planned to remain in the building until 2020.
CoStar Group's occupancy will bring the building to 80 percent occupancy. CoStar plans to lease out the remaining space.
The Washington Business Journal reports the MBA is currently battling Tishman Speyer Properties, its former landlord, in court over a $1 million termination fee issue.
Tishman Speyer alleges the trade group owes over $1 million for walking out on its 2007 lease before it expired. MBA rented space in a Pennsylvania Avenue office building before it moved into the L Street headquarters.
MBA says it plans to pay the penalty and that the dispute is over timing, according to Washington Business Journal.
CoStar Group is a commercial real estate research organization and an online real estate news reporting network.
Leave a comment